What Do Clients Want From Their Coverage Attorneys? The Policyholder Coverage Attorney's Perspective

Insurance Policyholder Chair Jill B. Berkeley presented a paper at the ABA Women in Insurance Conference as part of the panel "What Do Clients Want From Their Coverage Lawyers?" In the paper, Jill spells out her perspective on what exactly clients seek in their counsel. Today it extends well beyond publication rankings and a long, polished list of credentials.

As outside counsel in private practice, you have a demonstrated track record of success. You are an excellent lawyer. You are organized, efficient, responsive, and have a long list of credentials. Your credibility is well-established and is reflected in your resume and your marketing materials. You have been recognized and recommended in national and industry publications. Is that enough to be retained as coverage lawyer? These days, clients are looking beyond credentials and are seeking much more. This paper explores some of my personal ideas for what else clients want.

A. Be the Lawyer Your Clients Want to Retain.

1. Trusted Advisor Not a Hired Gun

One of my favorite observations is that clients hire lawyers who resemble themselves. That observation has led me to realize that I get in trouble if I try to be something that I’m not. Back in the day, when I was a young associate learning how to practice law, I tried very hard to follow instructions: "prepare a motion to dismiss; draft an answer to interrogatories; research and write an opinion letter on why there is no coverage, etc." That practice helped me understand how to be a lawyer, but it didn’t teach me how to serve clients.

As I have matured as a lawyer, I have realized that "getting the result the client wants" was not always the path I recommended. The more I learned about insurance coverage, and the more confident I became in my talent for strategic thinking, the more I understood I was not satisfied by executing orders for clients who were focused on achieving a specific result. This was one of the reasons that I switched from the insurer-defense and coverage world and gravitated to the policyholder side. I believed that my value proposition was to provide the benefit of my experience, insights and creativity, to help policyholders resolve disputes at the most economic and beneficial level.

2. Provide Practical and Clear Recommendations

I want my client to benefit from my ability to digest information quickly, sift through what is relevant, and anticipate the probable outcomes. Understanding how your opponent’s coverage counsel will view the world is a valuable asset. I believe that clients want to know the consequences of their actions and decisions, even if the analysis is complicated. I often outline my recommendations in a flow chart. If you take this path, then the following are likely outcomes. If this decision is made, then the probable result will be these possibilities. Although being able to predict the future is better left to fortune tellers and is not usually the province of coverage lawyers, coverage problems can often play out like a chess game. From experience comes the ability to anticipate your adversary’s possible moves and with a careful analysis, one can be prepared for the unexpected. While certain insurer counsel may use the same playbook in similar situations, I always counsel my clients not to underestimate our adversaries. I build room into my strategy and recommendations for my opponents to come up with something I haven’t thought of. Manage your client’s expectations, so when you encounter a surprise, they aren’t surprised.

3. Provide Alternatives

I am a huge advocate of looking at all the options, but I want to stay within the realm of reality. Finding the right balance between oversimplification and needless complexity is essential. I believe that alternatives should be couched in terms of probabilities and "risk versus reward." Alternative A is likely to cost "X," play out over "X" months, and result in "X" recovery more than "X%" of the time. I am not a believer in exhaustively outlining every possible alternative; only the meaningful ones that make sense.

4. Be a Good Listener

I love to talk, and my husband will often say that I’ll never let him take a breath before I interrupt. But listening, and hearing what concerns the client has, are invaluable for planning. One of my most annoying (or endearing, depending upon the perspective) is that I like to start at the beginning. I want more facts, more context, more information before I start the process of analyzing and making connections. "Knowledge is power" is a principle I respect. I hate having to say, "I didn’t know that" or "I didn’t see that document." The process of giving advice starts with soaking up as much information as possible at the beginning. Frankly, since so many coverage assignments come at the end of another dispute, it is a real challenge to play "Sherlock Holmes" and get to the bottom by starting at the top.

5. Ask Hard Questions; Give Bad News

Although there are some consultants who advise attorneys to "try and be nice," I’ve never had the illusion that would work for me. I am much more a "tell-it-like-it-is" kind of person. Being direct and to the point, with diplomacy, is the style that fits me best. That means I may often tread into issues or facts that make clients uncomfortable. In coverage cases, one often has to go beyond pure legal issues and delve into responses made on applications, late notice facts, or knowledge and circumstances that could lead to a claim. When you are ready to give your opinion, you can’t be afraid to deliver bad news. No client wants to hear they have little-to-no chance to win. No lawyer wants to tell her clients they are wrong. One may have to say to a client, "I understand your point, and I agree it’s an argument, but your chances of prevailing are slight." On the other hand, throughout the years I have learned that clients come up with theories that don’t fit neatly into case law or industry perspectives. You have to be willing to keep an open mind and give a new viewpoint an honest appraisal. Some of my most successful results were inspired by a client’s suggestion of how to proceed, which I may have rejected originally. I’ve learned to respect those colleagues who push the envelope and get results from courts that I initially thought could never work. But, in the long run, if you don’t provide an honest assessment of the facts or law, you will have no credibility. If the client knows what your opinion is, you can still work together to pursue his instructions.

B. Understand the Business

1. Goals, Strategies, Business Partnerships and Alliances

On the policyholder side, it is very clear that "one size does not fit all." A good investment for one client can look like an extravagant expense to another. Obviously, long term relationships with clients make learning how to read the client easier. Over time, you learn the "risk profile" for your client, their cash flow or profit margin concerns. But, so often, our policyholder engagements are "one–off." It is the rare non-insurance company that has repeat coverage disputes. Thus, understanding what is important to a client must be a priority. For instance, in the construction industry, when contracting parties have repeat business with each other, you have to take their relationships into consideration before deciding what policies to trigger. You also have to consult construction agreements to understand what the parties negotiated relative to primary versus excess expectations. In corporate acquisitions, often the insurance and indemnity provisions are negotiated by people who are not very sophisticated about how insurance will interrelate with indemnity, and the business deal between buyer and seller may not be correctly reflected in the insurance that was purchased to cover indemnity. Working with your client’s business partner or broker may overcome the insurance company’s reluctance to provide coverage.

2. Client Constituencies

As policyholder counsel, it is not always clear who your client contact reports to, and who, within the company, may be directing the client’s strategy. In many cases, if a risk manager is the contact, they may be embedded in the financial side of the company and report to the treasurer or CFO. In other situations, your client contact may be in the General Counsel’s office, and their client will be the CEO or COO of an operating subsidiary. Sorting out the chain of command is necessary in order to know the client’s concerns and goals. Preparing budgets and submitting timely and detailed billing records will also be subject to review by different responsible parties. In some companies, legal work is subject to purchasing guidelines; in other cases, the general counsel’s office will have its own budget and billing guidelines. Figuring out these mechanics is often as important as getting the opinion right, if you want to be successful.

3. Risk Assessment: It’s Not Just About the Money.

Non-insurance companies will usually approach risk differently from insurance companies. A policyholder corporation or professional is thinking about the cost-benefit of the time invested, the assets at risk -- like business relationships and good will -- and the resources required to achieve the desired result. Policyholder clients need to be educated about why an insurance company does not seem to act "rationally." It may not have the same interests in the cost of achieving a specific outcome, because those expenses have already been budgeted or reserved and will not affect profit margins. Holding on to capital and surplus has beneficial rewards, whereas paying expenses is just part of doing business.

C. Limitations

1. Don’t Bend Beyond Comfort Zone Even With Best Clients.

When you are just starting an attorney-client relationship, it is difficult to know what level of knowledge your client has, or what level of detail they require when being presented with solutions or options. Similarly, they do not know you. It is important to set clear lines about the scope of assignments and engagements, billing guidelines, time deadlines, and expected work product. It is so easy to "over promise," especially when you are trying to make a good impression. Nothing backfires, however, as badly as agreeing to do something that you can’t deliver. The Association of Corporate Counsel (ACC) has put together a thorough and logical checklist of steps to walk through with outside counsel when developing a plan for case management. With permission from ACC, we are attaching the checklist to these materials. I have found project management techniques to be very helpful in designing the scope of assignments. The more you use it, the greater comfort level you will have with the process of benchmarking and ball parking goals and expectations.

2. Be Wary of the "Spoon Fed" Assignments; Information on a "Need to Know" Basis is Dangerous.

In today’s world of corporate budgets and pressure to limit expenses, clients will often assume that the less information they give you and the shorter the turnaround, the lower the bill. In situations that entail the greatest risk, the limited budget is often short-sighted and inadvertently can turn a small matter into a big mess. Reasonable limitations are necessary, but cutting corners just to save billable time is a dangerous business. If I encounter this type of assignment, my "danger radar" goes on. I often find myself couching my responses with caveats and "CYA" statements. If clients do not like the limitations, they will often shop for another lawyer. My perspective is that you may have dodged a bullet. Your professional reputation and credibility are too precious to squander on a client who bullies you into giving an opinion that makes you uncomfortable.

D. Specific Coverage Strategies

1. Utilize Business Solutions and Relationships.

Now that I have given away all of my personal secrets, it is time to get to professional tips. As I stated at the beginning of this article, we assume you have all the knowledge and expertise about insurance law and procedure. Bringing value to clients is measured by your ability to problem solve. In addition to the law, you and your client have many resources to utilize on the business side. Your client’s risk manager knows her underwriter; the company’s broker employs claims professionals to interface with the insurer’s claims professionals; the general counsel knows the defense counsel on the other side, and you know the other coverage lawyers from your participation in bar association programs. Use these connections for informal discussions to exchange information or to send out "trial balloons." Wouldn’t you want to know if the insurer is interested in pursuing a compromised result before you go ahead and draft a 50-page complaint? Does it make sense to reach out to excess insurers to see if you have an ally against the primary insurer?[1] There are many paths to resolution. Knowing someone who knows someone who can open doors will, by definition, move the process forward.

2. Always Give the Insurer the Opportunity to do the Right Thing First.

Consistent with an attitude and personality of being direct is utilizing an approach in which the policyholder makes a demand upon the insurer that outlines what it wants from the insurer and why it makes sense for the insurer to agree. If you do not ask, you run the risk that the insurer has not figured out what would resolve the dispute. Also remember, "be careful what you ask for." Strategically, if you give the insurer the opportunity to provide what your client believes is owed, and the insurer refuses, you are in a strong position to go forward with your action plan without the need for further consent, direction or interference by the insurer. I often say that an insurer’s denial can be a gift. If the refusal is a breach of a duty owed by the insurer, the policyholder is now free to take any reasonable steps to protect its interests. Once the insurer abandons its insured, you can explore settlements without consent, assignments of rights to collect against the insurer, and a protection of the client’s own corporate or personal assets.

3. Use Alternative Fee Options, Balancing Cost With Result.

So much has already been written on the use of alternative fee arrangements that I do not want to repeat the basics here. The principles of project management, however, can be utilized to define the scope of an engagement at an estimated low-to-high cost. If, on the one hand, you understand the range of what pursuing recovery can cost, on the other hand, you can balance that with an expected range of results. That process allows the client to make reasoned decisions. As an example, you have a dispute that is valued at $2.5 million for full recovery, and you have developed a project plan that shows you may spend $100,000 to get a compromise settlement of $750,000. To recover more than $750,000, it is likely to cost $250,000 or more. This analysis helps the client manage its expectations. Your client can agree it is willing to spend $100,000 to recover $750,000 (netting $650,000), and if you recover more, it will share the success with you. But after you have spent $100,000 of the client’s money, it is up to you to decide whether to proceed with the additional recovery at your own expense. Project management demands discipline on your part to manage costs, but experience and benchmarking can give you some level of comfort in your ability to estimate what the process will cost.

CONCLUSION

These thoughts reflect many years of experience. Not every idea is necessarily a good one in all situations. Use your intuition and instinct to determine if a certain strategy feels right to you. How you find the right fit for yourself and your clients is a give-and-take process, with its share of successes and losses. Trying new ideas without the fear of failing is the best strategy. What’s the worst that can happen? You try again.